The bears den

[DukeCS33]

Exactly .... even I have a bearish view and I think we'll see a sideways market for a prolonged period with ample liquidity, low interest rate and relatively low oil prices. But for some reason if oil rallies to 150-200 level, then we'll get a market crash. I hope it doesn't happen.

This represents the toughest condition to swing trade. Have you not noticed that all the so called gurus who were selling trend trading strategies have almost gone quiet? Some diversified into selling FX courses while others started offering option courses.... these option courses are very toxic as most of the time, they would advocate selling of naked options or spreads to earn premiums.

 

[coolhead]

Spoken like a true bear.

The bull would think otherwise... and their base case would be that no news means no catalyst for any sell off and therefore, given flush liquidity, the stock market should just by default, rise. And by the same token, for the bearish scenario to play out, there needs to be a shock to the system by way of a trade war.... but that does not mean that Fed would sit idly and not cut rates to spur the economy.

That said, I belong to the camp which views a non resolution of trade issues. My only concern with being too bearish is that I think the Fed may cut rates if the economy slows down... there would be a lag though so I think the stock market would sell off before finding support from possible interest rate cuts.

U r right that the stock market will sell off before finding support from possible interest rate cuts. But interest rate cut is a positive feedback loop that US is heading into a recession and confirm this fear which drives market down further lol...
Stock market is always a leading indicator to economic recession.

Sent from HMD Global TA-1004 using GAGT

 

[DukeCS33]

U r right that the stock market will sell off before finding support from possible interest rate cuts. But interest rate cut is a positive feedback loop that US is heading into a recession and confirm this fear which drives market down further lol...
Stock market is always a leading indicator to economic recession.

Sent from HMD Global TA-1004 using GAGT

It really depends. If the Fed is seen as lagging, then markets may be sold down further. If they are aggressive and is ahead of the cycle and managed to instill confidence, market may push up higher.

 

[Mecisteus]

Don't buy oil ETF if WTI goes into contango (i.e. prices further out higher than the front month). The negative roll will eat into your returns.

An alternative to the ETF would be mini Brent contract listed on ICE Singapore. At US$60 per barrel for Brent, the notional value per lot is only US$ 6000.

Nah I'm not so crazy to buy those.

I was referring to XLE.

 

[coolhead]

It really depends. If the Fed is seen as lagging, then markets may be sold down further. If they are aggressive and is ahead of the cycle and managed to instill confidence, market may push up higher.

I've to say that fed is always lagging. But what the fed can do is to pre-empt the confirmed downturn economic trend and apply aggressive rate cuts as you mentioned, then it'll instil confidence, like what they and china did in 2008-2009. But they always lag initially.

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[revhappy]

I've to say that fed is always lagging. But what the fed can do is to pre-empt the confirmed downturn economic trend and apply aggressive rate cuts as you mentioned, then it'll instil confidence, like what they and china did in 2008-2009. But they always lag initially.

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If rate cuts always work, can you explain why Europe and Japan are in such a mess?

Also China, any incremental debt and stimulus doesn't have the same impact in GDP growth any more.

We are at peak debt and any rate cut will not help as companies are already neck deep in debt and cannot take on any more.

 

[coolhead]

If rate cuts always work, can you explain why Europe and Japan are in such a mess?

Also China, any incremental debt and stimulus doesn't have the same impact in GDP growth any more.

We are at peak debt and any rate cut will not help as companies are already neck deep in debt and cannot take on any more.

I didn't say rate cuts always work instead I said fed is always lagging.. What I am saying is that rate cuts serve to instil confidence in the market. At a fundamental level, the purpose of rate cuts is to let liquidity flow into the market due to 2 things:
1) encourage more lending to businesses so that commercial banks can gain more returns in private sector
2) decrease the propensity of consumers to save since they do not get as much incentive from low interest rate.

I am not as informed on Japan case but as I understand, both Europe and Japan experimented with negative interest rates to stimulate lending and borrowing. In Europe's case, even with so much liquidity, the consumers didn't want to spend much more because there is no need to spend more. It's like telemarketers giving you free loans but you don't need to overspend. Hence, it was a poor way to stimulate the economy. 2ndly, the economic business cycle is a vicious one, if consumers aren't paid more or employed, they can't spend. In this connection, it applies to your case that Europe is deep in debt.

I won't comment on china because I think the market mechanism is very opaque there. I don't know what data I can trust from China.

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[limster]

Nah I'm not so crazy to buy those.

I was referring to XLE.

I am using NORW as an oil proxy though XLE/SXLE is fine too, contango is a big problem with oil ETF.

 

[Mecisteus]

I am using NORW as an oil proxy though XLE/SXLE is fine too, contango is a big problem with oil ETF.

NORW is the country ETF?

woah that's quite a rare position.

 

[churnmaster]

This represents the toughest condition to swing trade. Have you not noticed that all the so called gurus who were selling trend trading strategies have almost gone quiet? Some diversified into selling FX courses while others started offering option courses.... these option courses are very toxic as most of the time, they would advocate selling of naked options or spreads to earn premiums.

Yes, that's why I said in one of the forums that in a sideways market very few fund managers actually make money and you are better off actively managing your passive funds.

For me, I come from a commodity background where you don't have dividends and many a times have negative rolls because of contango market structure. Add, to that commodity markets mostly trade within a range but also prone to violent breakouts in case of disruptions. Selling options is a way to earn some returns especially "covered call strategy" while taking the risk of being long the underlying. Selling naked put options is also a very disciplined approach of getting long at a given strike price and a lower acquisition cost because of the premium earned. Similar strategies also work for equity markets especially indexes. I just did a swing trade on ES selling OTM call option on (11/06) and closing the same yesterday (12/06) with a gain of just 3.75 pts.

 

[Mecisteus]

If rate cuts always work, can you explain why Europe and Japan are in such a mess?

Also China, any incremental debt and stimulus doesn't have the same impact in GDP growth any more.

We are at peak debt and any rate cut will not help as companies are already neck deep in debt and cannot take on any more.

Rate cuts don't stop at 0%.

Soon the new norm is to go negative i/r.

Savers have to pay interests to keep their savings in the banks.

To avoid paying interests, savers will be forced to consume or spend. This will in turn boost the economy.

Any instruments including stocks that can yield less than negative i/r will remain attractive.

 

[churnmaster]

A35 ralied almost 0.7% in the last two days on pretty big volumes and Singtel close to 52 week high again on big volumes.

 

[coolhead]

Rate cuts don't stop at 0%.

Soon the new norm is to go negative i/r.

Savers have to pay interests to keep their savings in the banks.

To avoid paying interests, savers will be forced to consume or spend. This will in turn boost the economy.

Any instruments including stocks that can yield less than negative i/r will remain attractive.

I think you meant "yield more than negative I/r" lol.

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[Mecisteus]

I think you meant "yield more than negative I/r" lol.

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Oops I should have put less negative. Ignore the than.

But I think you know it.

I mean -1% is still better than -3%.

 

[coolhead]

Oops I should have put less negative. Ignore the than.

But I think you know it.

I mean -1% is still better than -3%.

Oh yeh, understood.

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[revhappy]

http://www.investing.com/analysis/j...lete-capitulation-to-get-aggressive-200431110

Nice article, this sums up my view.

 

[limster]

http://www.investing.com/analysis/j...lete-capitulation-to-get-aggressive-200431110

Nice article, this sums up my view.

if theres a recession, i won't sell, just hold it and wait for the recovery.

if rates drop and credit is cheap, why wouldn't investors just keep their shares and hold and wait for recovery, especially if there is a structural shift to passive buy and hold ETF investing?

i haven't bought anything this month yet... at most I'll apply for Astrea V and get 5k-8k, but should I be positioning for a major crash and long-term depressed share prices or just a regular correction and V-shaped recovery?

 

[revhappy]

if theres a recession, i won't sell, just hold it and wait for the recovery.

if rates drop and credit is cheap, why wouldn't investors just keep their shares and hold and wait for recovery, especially if there is a structural shift to passive buy and hold ETF investing?

i haven't bought anything this month yet... at most I'll apply for Astrea V and get 5k-8k, but should I be positioning for a major crash and long-term depressed share prices or just a regular correction and V-shaped recovery?

You are a seasoned investor and you can wait it out during a crash. But I am not, if prices stay depressed for more than 2 years, it could affect my psyche. I already experienced first hand how I felt in Dec 2018. So it comes down to your risk tolerance. If you have a 10 year horizon and won't freak out, then no doubt equities is the place to be.

 

[DukeCS33]

You are a seasoned investor and you can wait it out during a crash. But I am not, if prices stay depressed for more than 2 years, it could affect my psyche. I already experienced first hand how I felt in Dec 2018. So it comes down to your risk tolerance. If you have a 10 year horizon and won't freak out, then no doubt equities is the place to be.

Would day trading not suit you better? You do not need to hold the position overnight - pnl is settled by end of the day and you can sleep well.

 

[Trader11]

You are a seasoned investor and you can wait it out during a crash. But I am not, if prices stay depressed for more than 2 years, it could affect my psyche. I already experienced first hand how I felt in Dec 2018. So it comes down to your risk tolerance. If you have a 10 year horizon and won't freak out, then no doubt equities is the place to be.

What's the rush? Can't you be patient?

Go Meditate like Osho